Global shares near record highs on vaccine optimism

London/Tokyo — Global shares approached record highs on Friday and the dollar headed for its best weekly gain in three months, as progress in vaccine distribution and US stimulus hopes prompted bets on further normalisation in the global economy.

The MSCI all-country world index, rose 0.2% to 667.9, coming within reach of a record high of 670.82 touched about two weeks ago. It was the fifth consecutive day of gains.

The Stoxx index of Europe’s 600 largest stocks was up 0.2% at 410.4, though slower vaccination rollout in continental Europe compared with Britain and the US tempered optimism.

MSCI’s gauge of Asian shares excluding Japan rose 0.4% while Japan’s Nikkei rallied 1.5%.

Expectations of a large stimulus by US President Joe Biden’s administration also supported risk sentiment while better-than-expected data on US job markets released in the past two days fanned further hopes of a strong payroll report due at 1.30pm GMT.

“US stocks hitting record highs is not just thanks to the vaccine rollout, but also expectations of fiscal stimulus as it looks as though the Democrats will go on their own and not compromise with Republicans on a smaller package,” said Philip Shaw, chief economist at Investec in London.

On Wall Street, each of the major indices rose more than 1% on Thursday, with the Nasdaq composite index and S&P 500 setting record highs.

Longer-term US treasury yields rose in anticipation of a large pandemic relief bill from Washington as well as on heightening inflation expectations.

The benchmark 10-year yield stood at 1.130%, having risen to a three-week high of 1.162% the previous day, while the 30-year bonds yielded 1.922%, near its 10.5-month high of 1.951% touched on Thursday.

Bond yields rose in Europe as well, with Germany’s 30-year government bond yield climbing back into positive territory for the first time since September.

A market gauge of future US inflation was at its highest since October 2018 while that for the eurozone hit its highest since May 2019.

It was bad news, however, for the internet’s new favourite shares, as the “Reddit rally” stocks GameStop and AMC Entertainment plunged further after two weeks of wild swings fueled by the WallStreetBets Reddit forum.

Dollar smile

The dollar headed for its best weekly gain in three months, lifted by growing confidence that the US economic recovery will outpace global peers.

The dollar’s bounce confounded dollar bears and traced a trading pattern known as the “dollar smile” ,which has, in previous years, preceded major US economic rebounds and currency surges.

The dollar index stood near a two-month high, having risen 1.1% so far this week, on course for its biggest weekly increase since late October 2020.

The euro changed hands at $1.1964, having hit a two-month low of $1.1952 while the yen hit a 3.5-month low of ¥105.70 per dollar.

“It seems markets are now trying to trade on economic normalisation based on progress in vaccination,” said Arihiro Nagata, GM of global investment at Sumitomo Mitsui Bank.

“The fact that the only currencies doing better than the dollar over the past two days are the pound and the Israeli shekel, the two countries that are going further ahead in vaccination, seems to support that.”

The pound stood at $1.3678 not far from its 2.5-year peak of $1.3759 hit late in January.

The shekel rose over the past two days, reversing its decline since mid-January after the Bank of Israel intervened to stem the currency’s strength after it had hit a 24-year high.

Strength in the dollar pushed gold to a two-month low of $1,785.10 an ounce on Thursday. The metal was last traded at $1,797.40.

Oil prices extended gains on the upbeat economic mood, falling inventories and the oil cartel Opec and its allied producers (Opec+) decision to stick to its output cuts.

US crude rose 0.6% to $56.6 per barrel and Brent was at $59.14, up 0.5%.